One Comment

There is some irony here…. in an economic sense, in that you can’t violate basic laws of economics and get away with it. John C. Goodman has tried relentlessly to make this point. The idea of community underwriting, as opposed to individual underwriting standards, is the essence of why Obamacare is ending up being more expensive than proponents had hoped; despite the subsidies to eligible recipients. It has indeed become, a “race to the bottom”. When individual subscribers can’t be assessed as to the financial risk they bring to the pool, then prices have to be charged that reflect an aggregate risk premium. This causes insurance to look very cheap for the chronically ill and be way more expensive for the healthy. This price distortion causes the sick to enroll at much higher rates than the healthy because it requires the healthy to act in a way that is not in their own self-interest. As prices go up due to heavier numbers of sick in the “pool” , then the disincentive for the healthy to enroll is even more profound. The end result, when premiums are max’ed out is to tighten reins on the network, reduce benefits within the law or cut reimbursements; or a combination of all of that. This is exactly what is meant by “a race to the bottom”.

Rather than pretending that pre-existing conditions don’t exist, or trying to legislate them away, why don’t we allow the market to accurately price them by allowing people to insure against the economic consequences of a “pre-existing” condition before they get one. That way, if/when they change insurance carriers, they are covered. This could be in the form of a rider paid by the subscriber, or employer, that would help offset the cost of the new policy to include the new condition under it’s covered benefits. If no “new conditions crop up, then the rider is not enforced.